Probate: Probate Courts Can Award Fees Against Losing Beneficiaries’ Future Trust Distributions When Their Actions Found To Be In Bad Faith

Probate contests are often donnybrooks between different beneficiaries or relatives. This next one was certainly that. However, the losing minority beneficiaries caused the trustee to expend lots of attorney’s fees, which were recouped when the probate court ruled they could be obtained from the losing beneficiaries’ future trust distributions. Unfair, cried the losers; neither equity nor statutory authority allows for such an award.

Boiling the facts down, minority beneficiaries did not want a trust’s principal asset, Onyx Ranch, sold under an arrangement approved by 60% of the germane trust beneficiaries. Minority members took a lot of actions to tank the sale, which did have a deadline for court approval. The lower court eventually approved the sale and ordered trustee to consummate it. However, the real upstroke is that the probate court granted trustee’s motion to recover $226,295.16 in attorney’s fees and costs, to be charged against losing beneficiaries’ future trust distributions. Losers, obviously unhappy, appealed.

The result? A published decision that went against losers.

Rather than involving mere supervisory powers, the fee/costs award was made within the probate court’s broad equitable powers over trust administration. Older decisions found no problem in finding that the fees could be charged against a losing beneficiary’s share of a trust when the loser’s litigation efforts were frivolous. (Estate of Ivy, 22 Cal.App.4th 873, 883-884 (1994); Conley v. Waite, 134 Cal.App. 105, 506 (1933).) Substantial evidence supported the lower court’s determination that losing beneficiary’s actions were taken in bad faith.

Losers also challenged as unreasonable winners’ use of Los Angeles attorneys (out-of-towners) rather than local Kern County attorneys. No go, said the appellate panel, especially given that the out-of-towners were thoroughly familiar with the case and costs were more reasonable given this familiarity with events. Out-of-towner’s “home” market rate is an acceptable lodestar factor under these circumstances. (PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1096 (2000) [one of our Leading Cases]; Horsford v. Bd. of Trustees of Calif. State Univ., 132 Cal.App.4th 359, 399 (2005).)

Lastly, the appellate court sustained a routine cost for “rush service,” finding there was no basis in the record to find it was an unnecessary cost.